BACK OFFICE HEROES: How to Avoid Tech Regret When Building Out Your Wealthtech Stack


Even as markets ebb and flow, technology marches onward, continuing to evolve the way the world does business—and it’s no different in the financial industry where wealth management firms are faced with an ongoing pressure to keep up with their competitors.

Wealth management firms find themselves caught between many different forces when it comes to making their technology decisions, said Michael Pinsker, founder and president for Docupace, a back-office technology platform for financial firms.

“There is a concept called technology debt, which is when you invest in technology for your company but then, if you fall behind, what happens is that you just start accumulating more technology debt—your company falls behind,” said Pinsker. “There are normal, healthy levels of technology debt, it always exists. It can become too big, though, which means that when you are ready to invest to advance your business, you might not be able to right away because your technology debt is so large that it will eat up those resources that could otherwise go to growing your business.”

When a firm realizes it has an unsustainable level of technology debt, it has to play catch up so that it will be able to leverage the ever-more-efficient technologies to come, Pinsker said.

While technology debt often forces firms to make decisions about their tech stack, another force, deemed technology regret, comes in after those choices are made.

“Tech regret is related, but potentially very different,” said Pinsker. “For example, a firm might make a decision with regards to its technology stack in terms of what kind of system they are going to use, then realize down the line, whether a year or two years from that point, that all of the sudden that technology has put them on a path that is incredibly expensive to maintain. Or, maybe, it’s something which is not integrated and which is not as effective or efficient as it could have been. As a result, they also now have to really kind of pivot as an organization—or learn to live with all the costs related to those earlier technology decisions.”

Tech regret forces firms to take a multifaceted approach to decisions about their technology stack, said Pinsker. Not only do they have to think about their technology in the present—how they upgrade, maintain and invest in technology, and how their technology works together—but they also need to think into the future about each of these issues.

Avoiding Tech Regret

“To avoid technology regret, there are several concepts which I would put front-of-mind,” said Pinsker. “Make sure that you know yourself first. Know your own firm. Are you an innovative firm that always goes out there on the cutting edge and is able to leverage new technology while understanding that, with that approach, you may have to pivot because sometimes you try new things and they work out, and other times, they don’t.”

Innovators need to have the ability to recognize when it’s time to pivot, and set up their firm culturally so that it’s not a huge shock when they have to do so, said Pinsker.

Other firms want to still be innovative, but do not feel the need to be on technology’s cutting edge, said Pinsker. They’re happy working with more proven technology—and they prioritize understanding how new technology will impact their firm operationally above the need to be an early adopter.

“It’s not right or wrong,” said Pinsker. “It’s just who you are. That should drive certain decisions, whether you go for the cutting-edge or whether you go for innovative but proven technology. After who you are, culturally, you also want to consider the change management factors. Those factors include whether your operation is ready for the new technology—what do you need to have? Is it more training? Is it a certain human resource capability—do you need to add people to help you understand and leverage new technology?”

Firms should also understand the operational impact of a new technology, said Pinsker—is it actually additive to their business? Does it work as a multiplier rather than a detractor? Can they support the technology and its users?

Where Integration Comes In

But there’s still another form of technology regret related to integration—the ability for different pieces of technology to work together in a seamless manner. Over half of advisors—57%–say that integration is their biggest roadblock to adopting technology.

“In today’s world, we live in very integrated environments,” said Pinsker. “We have information which flows from an advisor’s CRM to their back-office system, then to their product provider like a mutual fund company, or a clearing firm and/or custodian. Having the ability to have integrations between all those parties involved in one place creates efficiencies.”

Integration is complicated, said Pinsker. Different systems may have radically different requirements, technologies and languages, and bringing all of a firm’s different technology systems together into a cohesive and coherent unit may be difficult, time-consuming and resource intensive.

According to Pinsker, poor integrations render what would otherwise be effective technology to be ineffective for firms in practice as communication breaks down between their different platforms. As a result, most firms no longer want to build their own integrations.

“Understanding that and tackling it not only from the business side in terms of what kind of efficiencies we want to gain, but also thinking ahead by selecting platforms that are open so that you are able to integrate them easily or so that you can just rely on vendors who are partners in your technological journey to do that,” said Pinsker. “From the advisor’s standpoint, you absolutely want those technologies and platforms to be seamless, work seamlessly behind the scenes so the user doesn’t even need to think about the integration—it just happens.”

Technology has a lifecycle, said Pinsker, and as technology nears the end of its lifecycle firms naturally begin examining their technology stacks and looking to make changes. When they start asking questions about whether their systems are working well and are good fits for their business, they should also be thinking proactively about integrations.

In today’s advisor technology environment, advisors are connecting with partners or with a series of partners who are committed to creating integrated ecosystems—different pieces of technology that all come with the ability to work together easily.

“The philosophy has changed over the years,” said Pinsker. “It used to be that we’d see more firms doing this in-house, because the integrations were so hard to deal with so they would just create their own ecosystem in-house and maintain it, or use an all-in-one system. Now we see more and more often where firms realize it’s more economical and better for them from a tech standpoint to partner with specialists who are already in an integrated ecosystem—which gives them best-of-breed products that already talk to each other. That gives these firms a lift out of the gate to be able to leverage what’s already been developed rather than try to do it themselves.”

That shift has reduced the technology debt for each individual business and firm, said Pinsker.

Evaluating the Tech Stack

“To evaluate your technology stack, again, know yourself first,” said Pinsker. “First, evaluate your business objectives—are you meeting them? If the answer is yes, that’s great, because that means that your technology, which supports your business objectives, is most likely up to par.”

If a firm isn’t meeting their business objectives, they need to evaluate why, said Pinsker—examining processes, people and technology to determine what needs to change.

If technology is indeed the issue, a firm needs to ask themselves another series of questions, starting with whether they’re leveraging technology the right way, said Pinkser.

“Maybe you need to invest in it a little bit, or maybe it’s a situation where there’s a need for a complete overhaul,” said Pinsker. “It always depends on the firm. No. 1, however, needs to be your measure of success, what are your business objectives? After that, it’s what is your situation as it relates to maintaining technology: is it too expensive? Do you need an army of people to maintain and operate what you have versus having something lightweight that doesn’t require as much human capital?”

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